When should we sell our home? Should we wait? How do we get the most money out of our homesale? These are questions real estate agents get all the time.
But if you’re not an economist who can forecast the tides of the housing market to sell at just the perfect moment, we’ve got a little cheatsheet for you.
HomeLight picked the brains of top-performing real estate agents and economists for DIY housing market prediction tips so that you can forecast the perfect time to sell your home, and we’ve combined it with historic sales information about Seattle to help you get the most out of your sale.
3 tips for forecasting the perfect sale
1. Look to mortgage rates and how they’re impacting affordability
You’ve probably heard about the Federal Reserve inching up interest rates after a seven-year post financial crisis hiatus. This has a serious impact on potential buyers.
Chief Economist with industry-leading Windermere Real Estate, Matthew Gardner, says that for every 1 percent increase in mortgage rates, buyers’ buying power decreases by 10 percent, meaning that buyers can purchase 10 percent less house.
- When interest rates rise, it often creates a “lock-in” effect. This simply means that on-the-fence buyers want to pounce on a home quickly to lock-in lower interest rates, so that they can afford more house.
- Rising interest rates can create an immediate surge in buyer demand that is followed by a softening as buyers get priced out of the market.
2. Check out housing inventory to get a read on supply and demand
Supply and demand is kind of the basic rule of economics. For the real estate market, “supply” is housing inventory.
It’s what determines if you’re in a buyer’s market or a seller’s market. Low inventory gives the seller an advantage; a lot of inventory means it’s a buyer’s market because supply outweighs demand.
Months of supply
Economists look at housing inventory in terms of months of supply, meaning how many months it would take to sell all the for-sale homes in your market.
“I like to see a market somewhere between four and five months of supply,” Gardner said.
If your area has limited housing inventory, you’re likely to see excessive price growth.
Experts also measure inventory on the total number of for-sale existing homes, meaning not newly built, but those being resold.
The National Association of Realtors (NAR) puts out an existing-home sales report monthly. This report shows the numbers on total housing inventory. But you’ll want to check these numbers in a historical context, so you might want to use YCharts.com, which pulls data from NAR and puts it into handy charts, which will show the past five years.
- Historical context matters. Look at the overall context rather than the monthly numbers. Check year-over-year changes.
- Don’t get spooked at every little change. Small fluctuations happen. They won’t dramatically impact your home-sale price. Look for overarching trends. How has inventory fared over the past few months? What about three years?
- For signs of a market change, watch for evidence of inventory changing over three to six months.
- Use expert interpretations of the data to help you tie everything together.
3. Keep an eye on home prices
A major factor economists and experts look at when making housing predictions is home prices and their affordability.
Economists, including Gardner, look at the ratio of median home price to the median average income.
Here’s an example: In San Francisco, the median home sale price is $1.65 million and the median household income is $87,701. If you divide those numbers, you’ll get a ratio of about 19.
That matters because, according to Gardner, if the median home price is six times the median income, it’s not affordable. Three to four times the median income is the sweet spot.
So according to our numbers, San Francisco real estate isn’t affordable, but that’s not news.
One thing you can do, though you’ll have to register, but the information is free, is check out the gold standard of home price measurements, the S&P CoreLogic Case-Shiller Home Price Indices, which date back to 1987 and are released every month.
You can get a national index as well as a 10-city and 20-city composite index. It also breaks down a 20-city composite into 20 individual metro indices, which is very helpful if you live in a major market.
From the monthly report, you can find out how home prices across the country fared month over month and year over year.
- Home prices and inventory are closely intertwined and inversely related. Low inventory will likely push prices higher and higher, and when inventory is high, you’ll likely see prices go down. If you see inventory start to soften, you’ll likely see your house sell for less in a few months, keeping in trend with your area.
- If you’re motivated to sell, strike when home prices in your area are climbing steadily. If you wait around, you could miss out.
Best time to sell in Seattle
Now that we’ve talked about what to look at, we’ve got a little historical data from Seattle home sales. Based on HomeLight data of home sales from 2017, January is the best time to list your Seattle home.
Here’s why: It takes about two months to close on your home, so if you list your home in November, you could sell your home for 32 days sooner than if you listed in any other month.
If striking while the iron’s hot is your goal, buckle your seatbelts and get ready for a successful home sale that’ll get your home off the market.